Tesla's 13% Drop Weighs on U.S. Stocks, Tech Sector

U.S. stocks closed with mixed results on Thursday, with the Dow Jones Industrial Average rising 52.19 points, or 0.12%, to 42,479.93. The Nasdaq Composite Index fell 55.35 points, or 0.28%, to 19,405.14, while the S&P 500 Index declined 7.22 points, or 0.12%, to 5,963.59. The mixed performance was largely attributed to Tesla's decline, which weighed on the broader technology sector.

Tesla's stock experienced a significant drop, contributing to the overall weakness in tech stocks. The electric vehicle giant faced criticism from Donald Trump, who threatened to terminate government subsidies and contracts related to Tesla. This ongoing feud between Tesla CEO Elon Musk and Trump added to the market's uncertainty, leading to a more than 13% intraday decline for Tesla's shares.

Despite Tesla's struggles, other tech stocks showed resilience. Meta Platforms, Inc. (formerly Facebook) saw its stock price rise by more than 3%, while Broadcom Inc. and Advanced Micro Devices, Inc. (AMD) both gained more than 1%. NVIDIA Corporation also saw a slight increase in its stock price. The mixed performance of tech stocks reflected the broader market's volatility, with investors reacting to various geopolitical and economic factors.

The market's reaction to the U.S.-China trade talks also played a role in the day's performance. Following a call between the U.S. and Chinese leaders, Trump indicated a willingness to engage in further trade negotiations. This development, however, did not significantly impact the overall market sentiment, as investors remained focused on individual company performances and broader economic indicators.

Investors remained cautious about the potential impact of Trump's tariff policies, which could continue to affect the market in the second and third quarters. Ed Yardeni, president of Yardeni Research, noted that the impact of tariffs would be significant in the coming quarters, potentially harming corporate profits in the short term. Despite this, there has been little evidence of significant inflationary pressure so far.

Economic data released on Thursday also influenced market sentiment. The U.S. Labor Department reported an unexpected increase in initial jobless claims, rising to 247,000 from the previous week's 239,000. This increase, along with a decline in productivity, raised concerns about the labor market and economic growth. The U.S. Bureau of Labor Statistics reported that unit labor costs rose 6.6% in the first quarter, while productivity decreased by 1.5%, exceeding expectations.

Additionally, the U.S. trade deficit narrowed significantly in April, primarily due to a record decline in imports. The U.S. Commerce Department reported that the trade deficit for goods and services shrank by 55.5% to 61.6 billion, the lowest level since 2023. This reduction was driven by a 16.3% drop in imports and a 3% increase in exports.

Looking ahead, investors are eagerly awaiting the May non-farm payrolls report, scheduled for release on Friday. This report is expected to provide further insights into the state of the U.S. labor market and economic recovery. The mixed performance of U.S. stocks on Thursday highlighted the ongoing challenges and opportunities in the market. While Tesla's decline weighed on the technology sector, other tech stocks showed resilience, reflecting the sector's diverse performance. Investors will continue to monitor developments in the U.S.-China trade relationship, as well as individual company performances, to navigate the market's volatility.